Without Conventions, Colleges, Boston Hotel Performance Was Worst In The Nation In 2020
Boston hotels were decimated by the coronavirus pandemic last year, underperforming their peers in other cities, bringing down one of the nation’s priciest places to visit.
Visitors in 2019 paid on average $199 a night in Boston, a rate only behind New York City, Oahu and San Francisco, according to hospitality research firm STR. The city ended 2020 with an average rate of $122 a night.
Combined with an occupancy rate of 33%, a decline of nearly two-thirds of 2019 levels, revenues per available room in Boston dropped 71.3%, the worst decline among STR’s top 25 hospitality markets.
Hoteliers are weathering the storm and tentatively waiting for a pandemic-fueled return to travel fueled by conventions, events and even large graduations permitted once the state deems appropriate. Large gatherings, in Gov. Charlie Baker’s Phase 4 plan of reopening, appear far off as events have gone virtual, sports remain fanless and spring and summer gatherings are far from certain.
“I think we’re in for a very challenged period for the new term,” Cain International Senior Managing Director Eric Poretsky said. “We’re hopefully at the tail-end of all the holiday [coronavirus] surge. I have no expectations that the news is going to be positive for the near term.”
Cain is developing the rising Boston Raffles 147-room hotel in the Back Bay. Poretsky said his team is paying attention to the market, including the nearby Hynes Convention Center, whose schedule remains uncertain in future months. The events center has been dark since a wave of cancellations last March, and annual events in February through April at Hynes and its sister center, the Boston Convention and Exhibition Center, have already committed to virtual sessions.
The Seaport, a hub of modern commercial development and anchored by the BCEC and the 5,000-seat Rockland Trust Bank Pavilion, recorded even lower occupancy and revenue than hotels in other parts of Boston.
Average room rates declined 40% to $168.97 in Seaport and South Boston-area ZIP codes, according to STR, while average RevPAR dipped to $55.45, a 76% drop-off from 2019.
“I’ve never seen anything drop that much in my 16 years in Boston,” said Michael Jorgensen, managing director of the yet-to-open Omni Boston Hotel at the Seaport. “Even in ‘09 and ‘10, it didn’t drop that much.”
The Omni, whose opening was delayed a month to this July after pandemic-related construction delays, has kept a full sales team on board, and Jorgensen said the hotel has received more than 50 sales leads for bookings in just the past week, compared to 90 sales lead during the same time in January.
“I’m a little more optimistic that there’ll be a greater slingshot than some of the prognosticators will say,” Jorgensen said. “I can tell you that once we get into 2022, leads are pretty good.”
The Omni is across the street from the BCEC and has in-house conventions on its long-term calendar, Jorgensen said. The 500K SF-plus BCEC has events still on its calendar for May and beyond, but multiple representatives for the BCEC urged cautious optimism.
Massachusetts Convention Center Authority Executive Director David Gibbons, a former hotel leader, said his sales team works closely with local hotels in sharing the calendar of shows booked up to seven years in advance. Future conventions will also likely draw different crowd sizes once physical events return, he said.
“Some of the conventions perhaps are in sectors that have been decimated, so what’s going to happen to them?” Gibbons said. “Some of their normal exhibitors don’t exist anymore. So there’s a lot of wait and see.”
The Rockland Trust Bank Pavilion, which hosts graduations every May before a summer concert season, has not announced plans for 2021 after postponing its 2020 schedule and holding live-streamed performances instead.
Hoteliers said the lack of fans at Boston’s sports venues has also slowed activity, as the NBA continues to play without spectators, the New England Patriots' season is over and Major League Baseball will only allow fans to return to stadiums based on local regulations, ESPN reported.
Hotels meantime have had to undertake harsh measures including mass layoffs and reduced hours. Across the nation, lodging is a quarter of all CMBS loans in special servicing, and 55% of the $837M in CMBS loans that went into special servicing last month were hotels, according to Trepp data. Lodging was also the property type with the largest percentage of loans in delinquency, at nearly 20%, according to Trepp.
Lodging operators in Massachusetts are operating on a laundry list of COVID-19 restrictions as mandated by Baker, including limiting common-use area capacity to 25%. A small market exists for the weekend traveler, hoteliers said, and some locally based guests are seeking staycations while the corporate traveler still lacks.
“What you’re finding now is a lot of the travel is from driving distances,” The Envoy Hotel General Manager Joe Mellia said. “There’s deals out there to be had now, too. A lot of people who wouldn’t have traveled in the past are finding it attractive.”
The Envoy, a 136-room hotel in the Seaport, features illuminated dining igloos on a rooftop bar among high-end amenities, and Mellia said interest has been strong for Valentine’s Day weekend with an expected sellout. It's currently above 70% booked, he said.
Hotel experts all shared a cautious optimism that travelers are anxious to get out of their homes and spend, a sentiment shared among other struggling asset classes. Once events get the go-ahead from the governor, Gibbons said hotels have the potential for immediate turnarounds.
“Rooms can sell seven minutes out,” Gibbons said, noting travelers can now book a hotel room from their phone while on their way from the nearby Logan Airport.
Hoteliers still acknowledge the unknown concerning events, which may return with social distancing standards alongside a public not yet comfortable with going out.
“Even if America does great financially, a lot of conventions are international,” said Marcos Piteira, general manager of the Hyatt Place Boston Seaport, which opened in September with a reduced staff. “Are we going to have 15,000 people or 5,000 people? All those questions, nobody knows. That is the million-dollar question.”